"Wall Street's annus horribilis", The Economist, 12.13.2008, 85.
Convinced that the era of big, highly geared bets is over, Morgan Stanley has shrunk its balance-sheet from $1.3t to a shade over $750b. It expects to earn a return on equity of three to five percentage points less as a result of lower leverage. Retail banking, once mocked as deathly dull at the white-shoe firm, will become its 'fourth leg'. Having come so close to failing, Morgan is going all out to win back clients who fled. It says most have returned.
This marks a stunning about-turn, for John Mack, Morgan's chief executive, who must feel a bit like the Grand Old Duke of York. On returning to run the firm in 2005, after the ejection of the risk-averse Philip Purcell, he declared that it was under-leveraged and needed to push into mortgages, proprietary trading and private equity. These businesses are not being dramatically 'reshaped', ie, shrunk.
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